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AMD: Sharpening its Claws

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DQI Bureau
New Update

It’s

a company on the move. Last year was the best in its history, both in terms of

overall sales and net income. Advanced Micro Devices Inc (AMD) also hit the

1-GHz landmark in March last year. Two months later, the full-speed cache ‘Thunderbird’

core was ready for prime time. Then, at the end of October, AMD unveiled its

double data rate memory-capable chipset, the 760. The highlight of AMD’s

performance last year, however, has been the Athlon processor.

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The results have been spectacular. Processor and other core sales rose by

over 30% and AMD revenue, income and processor marketshare each grew

significantly in 2000. Not even the softness in the PC sales market seemed to

bother AMD, as the company posted annual sales for 2000 that were 63% higher

than in 1999. What’s more, between the processors sold early in 2000 based on

the K7 core, and those sold in the second half of the year based on the

Thunderbird core, the Athlon has achieved a 24% unit share, bringing AMD’s

total global desktop share to 17%. Not bad for a company that previously

struggled for a waning position in the value market.

AMD’s

Gains
  • Most PC vendors now ship

    AMD-based PCs, globally (Dell, E-machines do not.)

  • AMD has over 10%

    market-share in India, mostly due to home PCs. Corporate desktops

    remain Intel territory

  • Riding on its

    high-speed-cache Thunderbird core, the Athlon was AMD’s success

    story, pushing growth up to 24%. Global sales in 2000 were up 63% over

    1999

The India Plan

  • AMD has unleashed an

    aggressive marketing in India, including incentives for distributors

    and resellers

  • The focus: corporate

    sales, where it’s weak. The tough task: generate "pull"

    for AMD, instead of the need to push and fight against "Intel

    Inside"

  • Next Step:

    Sensitizing the government to make tender specs more generic (versus

    specifying "Intel PCs") in terms of architecture, clock and

    bus speeds and cache levels

  • A full-fledged India branch

    office is slated to be set up in Q2 this year, to be headed by a

    country manager

While all this is good to write about, particularly for those who have been

waiting since long for someone to break the near monopolistic hold of Intel, one

still wonders how the $4.6-billion company plans to take on the $33.7-billion

behemoth called Intel. It would also be interesting to watch the company

replicate its success story in India.

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Chong Kum Shiong, area channel manager, AMD Far East, which runs the Indian

operations through a liaison office, however, feels it is not actually an issue

of breaking someone’s monopoly. ‘‘Rather it’s the issue of increasing

marketshare in India as well as across the globe,’’ he says. This, AMD

proposes to do using a double-edge sword strategy–first, by offering products

that are better than its rival’s offers and second, by tying up with OEMs.

Additionally, AMD is also working towards sensitizing the government in India

and other agencies to make tender specifications more generic in terms of

architecture, clock and bus speed, cache level and floating point units (FPU).

Besides, it is also setting up a full-fledged Indian branch office in Q2 that

would be headed by a country manager. Not satisfied with this, AMD has also

announced an aggressive marketing program with special focus on the channel

partners.

But first things first

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What about the market outlook? While the performance and value sections of

the global home PC market have firmly embraced both the Duron and Athlon

processors and only a few large suppliers, such as Dell and E-Machines, do not

carry AMD products worldwide, the scene is quite different in India. In fact,

only two OEMs have been using AMD processors for their products here–HP for

its Pavilion range and Compaq for its laptops. Despite this, according to market

estimates the company has 10-12% market share in the country, almost 100% of it

coming from the PC segment–mostly white boxes from local assemblers.

The scenario changes quite significantly in the business workstation segment,

with not a single major vendor offering an AMD corporate solution. While the

Duron and Athlon product lines are believed to have excellent price-performance

ratios for both the value and performance markets, there must have been some

valid reasons why AMD failed to prop up sales in the corporate world.

The reasons, according to experts, are clear–the baggage that it has been

carrying in the form of its K5 and K6 models have really failed to match the

competition from Intel’s Pentium II, Pentium III or Celeron. Also,

compatibility problems with motherboards, chipsets, CPU cooling devices, and

poor system drivers resulted in a mindset that an AMD



processor was not as powerful, compatible or stable as a competing Intel
product. 

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Although the realities of the CPU market have since changed, old habits die

hard, and AMD continues to have a stigma associated with it. Brand loyalty is

also much higher in the corporate world and despite the fact that the company

managed to create a favorable wave with its K7 Athlon, which for the first time

surpassed the performance of a comparable Intel processor, it is yet to win the

Fortune 500 companies.

However, the single-biggest obstacle to corporate buyers choosing AMD is

simply the fact that systems featuring their products are not available.

A ray of hope

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With the home market embracing the AMD Athlon and Duron processors, market

analysts see the much-needed ray of hope for AMD. Agrees Rahul Singh, senior

marketing specialist, AMD Far East Ltd, ‘‘The success in the consumer

segment is of course the first stepping stone into the commercial market,

because these great products essentially translate into the same benefits to the

home PC user and the business user alike’’. According to him, a good

experience with an AMD home PC may allay fears that AMD is not compatible or

stable enough for a corporate workstation.

The game-plan

AMD’s Reseller Program
  • Sales incentive scheme and loyalty programs

  • Certification program to recognize resellers’ technical skills. 

  • Contests

  • Sales tools kit including flyer builders, selling guides, benchmarks, logos and POS materials

  • Wide range of pull activities like advertisements, road shows

  • Online feedback mechanism

Target for Q1 2001

  • 1,000 registered resellers from 75 cities

  • 200 bronze certified resellers in 24 cities

  • 100 silver certified resellers in 10 cities

  • 20 gold certified resellers in New Delhi and Mumbai

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A look at the company’s marketing plan for India and one realizes that the

whole energy is being channeled towards garnering corporate sales. The company

is using three distinct channels to achieve this–MNC OEMs, local OEMs and

master distributor. Says Shiong, ‘‘Our efforts are aimed at converting AMD

product from being a push to making it a pull product.’’

According to Singh, while AMD is negotiating with both MNC and local OEMs to

achieve a few workstation design wins in order to make an impact in the

corporate environment, it is also working closely with channel partners to

increase this pull. The company has already launched three marketing programs.

One, AMD reseller program aimed at strengthening the channel network. Two, AMD

& Friend program aimed at building customer loyalty amongst the end users.

Three, AMD Athlon Center at the retail showroom level aimed at increasing

product capability awareness amongst masses. The company is also working closely

with its three master distributors–Avnet Max, BBS Electronics and Intraco Tech–to

create a pull amongst the second tier OEMs (local assemblers).

An interesting bit of news leaked from Intel recently that could put an odd

twist on AMD’s multi-processing plans. It was recently discovered that the

Pentium 4 equivalent of Intel’s Xeon, named Foster, would offer SMT technology

(called Jackson). SMT, or Simultaneous Multithreading, allows multiple program

paths (threads) to be run concurrently inside the processor. SMT allows a single

processor to appear to the OS as two or more logical processors, thus giving

dual processing or better performance without having to spend the money for a

dual processor or better platform.

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There is optimism in the air for AMD, which rose from the doldrums in year

2000 completely giving up its second fiddle role and surging into a comfortable

position. Looking at its product road map, the only thing that can go wrong with

this company is the timing. It is also the time for it to go for a true market

thrust into the corporate arena, which AMD is in a position to support thanks to

the success of their processor line that has made available enough cash to them.

According to reports, the company is aiming to close the year with 30% global

market share and intends to repeat the same in India. So while we wait till the

year-end to report the result of this aggressive war plan, end users can at

least hope for better computing experience.

The Technology

Route

Shubhendu Parth in New Delhi

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